After milestone year of recovery, state government spending to slow

This year was one of milestones for state budgets, but the upward swings of 2016 will likely be dampened in the years ahead.

It took almost a decade, but total state spending and revenues finally surpassed pre-recession peaks this year, according to a new survey from the National Association of State Budget Officers (NASBO). Yet more than two dozen states haven’t reached that milestone, a sign of the recovery’s uneven progress after the worst economic collapse in more than a generation.

While fiscal 2016 also marked the highest annual growth — 5.5 percent — for total state spending in nearly a decade, it was primarily driven by significant one-time spending increases and technical adjustments in several large states, including New York, Ohio and Texas. The median spending growth rate across the 50 states was 3.8 percent, which is lower than last year’s but slightly ahead of expectations a year ago.

Looking ahead, spending is projected to slow down even more, to 2.5 percent next fiscal year (which begins July 1 for most states). Revenues are also projected to slow.